Is This the Big One?

American Consumers Newsletter

Is This the Big One?

IN THIS ISSUE:

1. Hot Trends: IS THIS THE BIG ONE?
2. Q & A: WILL THE 2010 CENSUS SURPRISE US?
3. Cool Links: RETIREMENT, CELL PHONES, COMPUTERS
4. New and Expanded Reference Tools: AMERICAN ATTITUDES, AMERICAN HEALTH, AMERICAN GENERATIONS, and AMERICAN TIME USE
To see Cheryl Russell’s Demo Memo blog, click here.

1. Hot Trends

Is This the Big One?
They call it “econophysics,” a new way to understand economic change. Its practitioners seek to go beyond earthquake metaphors and harness the science of seismology to understand gyrations in financial markets. “Scientists have found that earthquakes, natural and financial, share similar patterns,” reports the New York Times. “Small subtle market gyrations are such regular occurrences that they are barely noticed; extreme market shocks–the proverbial ‘big one’–are very rare.”

Is the Great Recession the proverbial Big One? Probably, yes. Nearly every macroeconomic indicator took a stomach churning turn over the past few years. To date, however, there has been little household data showing how family finances were affected by the jolt. To be sure, a number of pollsters have been asking Americans how they feel about the recession (bad!), but no one has produced objective financial data to show whether those feelings are based in fact or fear. That’s because the Federal Reserve Board’s Survey of Consumer Finances (SCF), the sole source of data on household wealth, is taken only every three years. The last survey was fielded in 2007–near the peak of the housing bubble. The next survey is being conducted this year, but the results will not be available until 2012.

The feds have been scrambling to come up with household-level data, even commissioning an unprecedented 2009 follow-up survey of the households that participated in the 2007 SCF. Results of the follow-up survey will be released later this year.

In the meantime, the Federal Reserve Board has not been idle. In a study released earlier this year (The Finances of American Households in the Past Three Recessions: Evidence from the Survey of Consumer Finances, paper 2010-06), fed researchers applied 2009 asset values to 2007 SCF data, projecting the impact of the Great Recession on household wealth. They also compared changes in household net worth during the 2007-09 time period with net worth changes during the last two recessions–1990-92 and 2001-02. Their finding: the Great Recession is off the charts. In the 1990-92 economic downturn, median household net worth fell by a modest 3 percent, after adjusting for inflation. In the 2001-02 downturn, net worth actually climbed 7 percent. In the current recession, median household net worth plunged 30 percent.

If that number isn’t enough to make your hair stand on end, there’s more. In the two earlier recessions, only 4 percent of households saw their net worth fall 20 percent or more. In the current recession, 47 percent saw their net worth shrink by at least 20 percent. Among householders aged 45 to 64, the backbone of the American middle class, the 53 percent majority lost at least 20 percent of their wealth.

A one-two punch makes the Great Recession far worse than the previous two recessions, report the researchers. This time around, in a worst-case scenario type of thing, both stock and housing values plummeted. In the previous two recessions either housing or stock values were stable, limiting losses.

Polling shows that the aftershocks of the Great Recession are pulling entire families into the abyss. According to a Pew Research Center poll released in June, 49 percent of Americans–nearly half the population–has had to loan money to a family member or friend to help them pay their bills. Conversely, 42 percent of adults under age 30 have had to borrow money from family or friends to cover expenses. Twenty-four percent have had to move back in with their parents. A Charles Schwab survey, which examined the effects of the recession on the “sandwich generation” (defined as Americans with adult children aged 23 to 28 and at least one living parent), found a substantial 41 percent providing financial support to their adult children.

What happens next? With the aftershocks from the Big One reshaping the landscape, American families will have to carve a new road for themselves. Blocking their way is the rubble from the collapse of the housing market. The Federal Reserve study finds an unprecedented 12 percent of homeowners saddled with a mortgage that exceeds the value of their home. Among homeowners under age 45, the figure is an even larger 25 percent.

According to the Schwab survey, 44 percent of the sandwich generation says that helping their adult children financially is their top priority. Given this, it’s not hard to predict that millions of American families will be spending down their wealth to keep their children from falling through the cracks.

By Cheryl Russell, editorial director, New Strategist Publications. If you have questions or comments about the above editorial, e-mail New Strategist at demographics@newstrategist.com.

BET YOU DIDN’T KNOW

Millennial generation (aged 16 to 33) as a share of the nation’s unemployed: 45 percent.

Will the 2010 Census Surprise Us?
In contrast to censuses past, the results of the 2010 census are not likely to surprise us. In fact, the overwhelming response could be a collective yawn. What was all the fuss about? Didn’t we already know that?

At the national level, yes we did know. The Census Bureau’s estimates and surveys do a good job of keeping us up to date on the size and characteristics of the U.S. population. But the census does much more, providing population counts and demographic profiles for the entire country down to the neighborhood level. Nothing but a census can do that. So when census results begin to emerge, stifle the yawn and appreciate the depth of the information.

The 2010 census asked only 10 questions, and three of them were administrative (telephone number, name, and a double-check on each person’s permanent address). The most interesting socioeconomic questions (such as where our money comes from) have been siphoned off by the annual American Community Survey. This is what the census will tell us about every neighborhood in the United States:

Number of people

Number of households

Household size

Household relationships

Sex

Age

Race

Hispanic origin

Homeownership and mortgage status

Which answer will surprise us the most? The biggest surprise may be household size. For decades, household size has been declining as smaller families became the norm and more people lived alone. In 2009, however, the Census Bureau’s Current Population Survey recorded a tiny blip upwards (from 2.56 to 2.57 people in the average household) as the Great Recession forced Americans to double up. The 2010 census may show that the doubling up has been even greater than suspected. Other data sources hint that this may the case: housing vacancies are at a record high and many middle-aged parents are reporting that their adult children have moved back home.

By Cheryl Russell, editorial director, New Strategist Publications. If you have any questions or comments about the above Q & A, e-mail New Strategist at demographics@newstrategist.com.

BET YOU DIDN’T KNOW

Percentage of Americans with a great deal of confidence in the leaders of the health care industry: 39.

To keep up-to-date on ever-changing demographics and lifestyles, check out these useful links.

Ready for Retirement?
How many baby boomers are at risk for not having enough money in retirement to pay for basic expenses including uninsured health costs? This report on retirement readiness from the Employee Benefit Research Institute will tell you. Among the oldest boomers (aged 56 to 62), a painfully high 47 percent are at risk of running out of money. For younger boomers and Gen Xers, a smaller 44 percent are at risk. This dense analysis of retirement readiness examines how much more workers will need to save to lower their risk of running short.

Wireless Almost the Norm
In some demographic segments, the percentage of households using cell phones only (no landline phone) is approaching the 50 percent mark, according to this semi-annual report from the National Center for Health Statistics. As of the July-December 2009 time period, the households most likely to rely only on cell phones are those headed by householders aged 25 to 29 (49 percent), renters (43 percent), Hispanics (30 percent), and the poor (36 percent).

Computers Are the Norm
It seems almost quaint to track ownership of computers now that they are ubiquitous to the point of being embedded in cell phones. But this Bureau of Labor Statistics report on computer ownership, based on data from the Consumer Expenditure Survey, includes interesting historical data on computer ownership (desktop and laptop). As of 2008, 77 percent of households owned a computer–up from 48 percent in 2000. Households with computers owned an average of 1.55 in 2008, up from 1.25 in 2000. Householders aged 35 to 44 are most likely to own a computer (84 percent), as they were in 2000 (61 percent). In only one age group do fewer than half of households own a computer. Among householders aged 75 or older, a 42 percent minority are computer owners. But this is up from just 13 percent in 2000.

BET YOU DIDN’T KNOW

The age group that spends the most time talking to family members on the phone: 75+.

4. New for 2010: All new and expanded one-stop resources for understanding American consumers

Get accurate and reliable answers to your questions about American consumers from New Strategist’s books and downloadable reference tools. Much of the data in New Strategist’s references you cannot get anywhere else–including online!

American Attitudes: Who Thinks What about the Issues that Shape our Lives The new sixth edition of American Attitudes coaxes the results of the latest General Social Survey out of the shadows of academia and makes them readily available for researchers who want to explore Americans’ changing attitudes. Its hundreds of tables reveal what Americans think about topics ranging from gay marriage to the American Dream, how we feel about our financial status, our hopes for our children, how often we socialize and with whom, our religious beliefs, political leanings, and working conditions. Click here to see tables of contents, sample pages, and more.

American Generations: Who They Are and How They Live The new seventh edition of American Generations is a superior resource for researchers who want to quickly and easily compare and contrast the six living generations–iGeneration, Millennial, Generation X, Baby Boom, Swing, and World War II. Today’s world is changing rapidly and people who are as little as ten years apart in age can have very different experiences growing up, making them unlike one another in significant ways. American Generations reveals their differences and similarities. Click here to see tables of contents, sample pages, and more.

American Health: Demographics and Spending of Health Care Consumers The new third edition of American Health provides a comprehensive look at the demographics of health care consumers and the services they use, ranging from fish oil supplements to mammograms, from doctor visits to prescription medications. Click here to see tables of contents, sample pages, and more.

American Time Use: Who Spends How Long at What If you have ever wondered while watching TV why advertisers are so intent on selling snacks or sleep aids or cleaning products–or even why they spend so much money on television advertising itself–the new second edition of American Time Use has the answers. Here you can find detailed time use data for the two most important demographic characteristics for determining how people spend their time–their age and sex. Click here to see tables of contents, sample pages, and more.

For your convenience, New Strategist’s titles are available as searchable single- and multiple-user pdfs that are linked to spreadsheets of all the data tables in each book so you can do your own analysis and create PowerPoint presentations.

BET YOU DIDN’T KNOW

Percentage of Americans with at least one grandparent who was born outside the United States: 41.